How Sonepar escaped punishment in the first Sapin II case

On July 4, the French Anticorruption Agency’s (AFA) Sanctions Committee rendered its first decision, dismissing all claims raised by the AFA and ruling that at the date of the hearing, the defendant company had implemented a system of detection and prevention of corruption which complied with the obligations imposed by Article 17 of Sapin II.

Before analyzing the key inputs of this judgment, I’ll briefly summarize the supervisory powers of the AFA.

Established by the Sapin II law dated December 9, 2016, the AFA is an administrative body which has no judicial power. It is notably in charge of preventing corruption and ensuring that the companies which fall within the scope of Article 17 Sapin II and must have a system of detection and prevention of corruption comply with the eight requirements imposed by this provision.

To fulfill its mission, the AFA has been granted the power to conduct investigations and inspections on companies’ premises. In particular, the AFA has the right to: Request the communication of any document it considers useful, conduct on-site searches, verify the accuracy of any information provided, interview any person including employees of the company and third parties, and request the assistance of an expert.

Any interference with the AFA’s prerogatives is a criminal offence which may be sanctioned by a fine of up to €30,000 ($33,000).

Furthermore, the AFA has the obligation to report to the Prosecutor any criminal behaviour which it becomes aware of. In some cases, the inspections conducted by the AFA have thus led to the opening of a criminal investigation by the National Financial Prosecutor.

The inspection of the AFA usually starts by sending a questionnaire of 163 questions to the company controlled which must reply and send the documentation requested within two weeks. This first phase is then followed by an inspection on the company’s premises. During their inspection, the AFA’s inspectors interview the directors, the compliance officer and any persons they deem necessary. To date, the AFA has conducted 53 inspections and interviewed an average number of twenty persons per company but sometime much more.

At the end of its inspection, the AFA sends a preliminary report to the controlled company which must respond and present its comments within two months. Then, the AFA establishes its final report.

Shall the AFA’s director consider that the controlled company has failed to comply with its legal obligations, he can either notify a warning to the inspected entity to enjoin it to comply with specific obligations, or issue a statement of complaint and refer the matter to the AFA’s Sanctions Committee.

The AFA’s Sanctions Committee is composed of professional judges. It has the power to impose administrative sanctions of €200,000 ($220,000) for private individuals and €1,000,000 ($1,100,000) for legal entities if it considers that the company breached its obligation to prevent bribery.

Further to a control initiated on October 17, 2017 against Sonepar, a French company, the AFA’s director referred the case to the Sanctions Committee on the ground that Sonepar had breached five of the eight obligations imposed by Article 17 of Sapin II.

The five alleged breaches were:

Improper implementation of the risk mapping document;

Deficiency of the company’s code of conduct;

Failure to implement a proper third’s party due diligence procedure;

Failure to implement proper accounting control measures;

Lack of implementation of an internal control and audit process of its anti-corruption program.

Sonepar challenged all of these allegations and raised several procedural defenses. It explained that even though it had not strictly followed the methodology suggested by AFA’s recommendations published in December 2017, it has implemented:

Risk mapping document with the assistance of a compliance expert. The Company developed its methodology by using 42 scenario and by interviewing 139 persons. This document has identified seventeen major risks in 44 countries. It demonstrates that the Company has deployed 182 action plans to mitigate the risks of corruption which were implemented at 75 percent ;

A governance charter, a code of conduct and a compliance guide stating specific examples of illicit behaviors. These materials were translated in nineteen languages and published in 44 countries;

Third parties assessment procedures that it has stated to roll out concerning its 600,000 customers and 20,000 suppliers;

An accounting control manual which was updated in 2018 and in 2019 to incorporate nineteen additional specific checkpoints to assert the risks of corruption;

An internal control and audit process. It has a two-level control system governed by the Group Compliance Department and the Group Internal Control Department.

Regarding the procedural defenses raised by the company, the AFA’s Sanctions Committee dismissed the arguments according to which the proceedings should be annulled on the basis that the control would have been extended beyond the mission of AFA, to cover the research of criminal offenses On that point, the Sanctions Committee held that it does not have jurisdiction. It went on to consider that the AFA may request information which pre-dates the entry into force of Sapin II. Last, it ruled that the absence of transcripts and records of the interviews of witnesses by the AFA inspectors does not affect the validity of the inspection.

On the merits, after a detailed analysis of the measures effectively implemented by Sonepar and the specific circumstances of the case, the Sanctions Committee dismissed all the claims raised by the director of AFA.

It ruled that the potential breaches are assessed at the time where the Sanctions Committee examines the case. This means that should a company have not properly implemented the measures imposed by Sapin II at the time of the AFA’s inspection, the entity will have the possibility to remediate to its potential failures before being judged by the Sanctions Committee.

It further held that even though the risk mapping document did not mention the risk of trading in influence (trafic d’influence), the Company had complied with its obligation because this offence is not referred to in Article 17 of Sapin II.

Furthermore, the Sanctions Committee ruled that the AFA’s recommendations are not mandatory but are just a frame of reference and that a defendant can demonstrate that it has complied with the law by using its own methodology. However, it should be underlined that the Sanctions Committee has conducted a thorough analysis of the measures implemented by the Company which had dedicated very important resources to comply with its legal obligations.

Since the Company was not sentenced by the Sanctions Committee, it will be interesting to see in future decisions of the Sanctions Committee what practices constitute breaches of Article 17 of Sapin II which call for a sanction.

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Sophie Scemla, pictured above, is a partner at Paris-based law firm Gide Loyrette Nouel. She is the Vice-Chair of the IBA Anti-corruption Committee and a member of the special committee on corporate investigations for the French Bar association (Comité National des Barreaux). She can be contacted here.

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